Foley Company uses a job-order costing system. The following data relate to the month of October, the first month of the company’s fiscal year: a. Raw materials purchased on account, $210,000. b. Raw materials issued to production, $190,000 (80% direct and 20% indirect). c. Direct labor cost incurred, $49,000; and indirect labor cost incurred, $21,000. d. Depreciation recorded on factory equipment, $105,000. e. Other manufacturing overhead costs incurred during October, $130,000 (credit Accounts Payable). f. The company applies manufacturing overhead cost to production on the basis of $4 per machine-hour. A total of 75,000 machine-hours was recorded for October. g. Production orders costing $510,000 according to their job cost sheets were completed during October and transferred to Finished Goods. h. Production orders that had cost $450,000 to complete according to their job cost sheets were shipped to customers during the month. These goods were sold on account at 50% above cost. Required: 1. Prepare journal entries to record the information given above. 2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant information above to each account. Compute the ending balance in each account, assuming that Work in Process has a beginning balance of $35,000
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Problem 3
Foley Company uses a job-order costing system. The following data relate to the month of
October, the first month of the company’s fiscal year:
a. Raw materials purchased on account, $210,000.
b. Raw materials issued to production, $190,000 (80% direct and 20% indirect).
c. Direct labor cost incurred, $49,000; and indirect labor cost incurred, $21,000.
d.
e. Other manufacturing
Payable).
f. The company applies
machine-hour. A total of 75,000 machine-hours was recorded for October.
g. Production orders costing $510,000 according to their
during October and transferred to Finished Goods.
h. Production orders that had cost $450,000 to complete according to their job cost sheets
were shipped to customers during the month. These goods were sold on account at 50%
above cost.
Required:
1. Prepare
2. Prepare T-accounts for Manufacturing Overhead and Work in Process. Post the relevant
information above to each account. Compute the ending balance in each account,
assuming that Work in Process has a beginning balance of $35,000
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